Former Kids Company staff have been awarded 90 days’ pay from the date of the charity’s closure on 5 August 2015, in an employment tribunal judgment released yesterday.
But a charity lawyer has warned that it is unlikely they will get all of that money.
Kids Company collapsed because of significant financial problems. All of its staff were dismissed on 5 August 2015 and a winding up order was made 15 days later.
But a judgment released by the London South Employment Tribunal yesterday, based on a hearing held in August 2016, made a protective award to staff of 90 days’ remuneration from 5 August 2015 and ruled that "complaints made under section 189 of the Trade Union & Labour Relations (Consolidation) Act 1992 are well-founded".
Section 189 of that act covers the protective awards that should be made if employers fail to properly consult staff representatives about any redundancy programmes.
The judgment runs through a number of documents from the months leading up to Kids Company’s demise. It highlights a Cabinet Office report for April and May 2015 that said "there had been individual conversations with staff who might want to move on to reduce redundancy payments" and the charity "did not have the money to carry out a redundancy structure".
A one-off grant application by Kids Company for a further £3m from the government, dated 12 June 2015, said the charity would reduce staff levels by 58 per cent, or 323 posts, the judgment says.
The grant application said redundancy calculations had been made for all members of staff and the redundancy process was expected to last until the third week of September 2015, but could not be specific about which posts would be lost.
The judgment says redundancy payments, payments in lieu of notice and accrued leave pay were expected to cost the charity £3m.
On 3 August 2015, a letter from the Cabinet Office terminated the £3m grant agreement and asked for the immediate repayment of the unspent grant of £2.1m. This came after allegations that Kids Company had used some of the grant to pay staff salaries in July, a purpose for which the funding was not intended.
The judgment says that, throughout this process, the charity did not properly consult staff representatives about the proposed redundancy programme, which was why it decided to make the award.
It says that "by June at the latest there was no option which did not involve significant numbers of redundancies", which triggered the statutory obligation to consult staff representatives.
Helen Cookson, senior associate in the employment team at the law firm Trowers & Hamlins, told Third Sector that the duty on employers to consult with staff representatives ahead of a redundancy programme "are taken very seriously by the tribunals, so if there has been a complete failure by an organisation to meet those obligations, their starting point will be that they should make the award of three months’ gross pay per employee".
Cookson said the amount staff would get depended on how much they had already received and how much money was left to pay Kids Company’s creditors. She estimated the awards could be worth a total £1.25m, but it was unlikely the staff would get the full amount.
She said that although some money could be paid to former employees by the government through the National Insurance Fund, there to help staff that have suddenly been made redundant when their employer becomes insolvent, this was capped at £479 a week for a maximum of eight weeks.
Cookson said: "It is possible that people might get some money out of it, but while their award is 90 days, they won’t get 90 days, assuming all the assets have already been accounted for by the administrators."